Written By: Stewart Cao
What defines a corporation being socially responsible? Corporate social responsibility refers to the belief that companies have an unspoken duty to groups of people other than their shareholders and beyond what their law or union contracts limit them to. In other words, the company’s actions is not only benefiting their shareholders, but as well as their community, employees, and customers.
Before diving further into what makes a corporation socially responsible, we need to understand the tradeoff of what is considered right and what is considered wrong. Let us assume there are two companies. Company A wants to expand their presence into a developing country where Company B is located. Company A decides to set up business in that developing country which has lower standards of environmental protection. However, Company A cannot compete with Company B’s prices, so Company A decides lower their spending on waste control, to a standard that is acceptable in the developing country, in order to lower their overall costs. Should company A be obligated to regulate their waste control to a higher standard than the local laws demand them to?
According to our definition of corporate social responsibility, a company has to go beyond what their laws limit them to in order to be considered socially responsible. But, at the same time, by cutting out waste control, Company A can continue to do business in the developing country. This in turn promotes economic growth by creating jobs in the community and bringing more competition in the market, which potentially can lower prices for the consumers. From a pricing standpoint, citizens of a developing country would rather purchase a product that is more cost effective than a product that offers a premium such as being more environmentally friendly. The most logically course of action for the company to take is to follow the foreign country’s environmental protection to the bare minimum.
People can view this logically course of action as being socially responsible because of how it could promote economic growth in the community, but that is merely just speculation. The intended action is to compete with Company B’s prices, so that Company A can continue to run their business. A company that goes beyond the thought of trying to maximize profits for themselves and their shareholders could be considered socially responsible.
However, can a company be both be socially responsible and increase their bottom line? They can. It starts with the consumers. Corporations hear our voices and try to market to us. We can see this with the critique TOMS received the past few years regarding their “buy one, give one” policy. Their mission statement actually undermined the economy they donated their shoes to because they outsourced jobs to other countries. After receiving this criticism, they moved 1/3 of their production to the countries they donate to in order to satisfy our concerns. If we, as consumers, support corporations that go beyond what laws require them to do, then we will see other corporations adapting these practices as well, just like how we saw with TOMS and BOBS. As a result, globalization will eventually take place as our support for these corporations reach an international scale.